If I had to guess (and I do) I'd say it's because servers cost money, and the owners of the site don't want all their storage space filled needlessly with people's multi-megabyte photos. 1 MB is more than enough to display a sharp image on a standard-size computer screen.

A better question: Why would anyone waste 1 MB of memory on his phone to store a photo that will display in something like a 3 inch square?